Kingfisher CEO forecasts little change in UK retail market

“It’s more uncertain than it’s ever been,” Cheshire said of the U.K., where Kingfisher’s B&Q is the largest home- improvement chain. France, the retailer’s largest market by profit and sales, “is structurally a bit better” as consumers are less indebted, the CEO said yesterday in the northern French city of Lille.

Boosting U.K. growth will depend on political decisions, Cheshire said, adding that Chancellor of the Exchequer George Osborne should invest in job creation. London-based Kingfisher has said it plans to invest 130 million pounds ($204 million) and create 1,200 jobs in the U.K., where shrinking household incomes and consumer confidence have caused sales to decline.

Cheshire advised against cutting the value-added tax rate, saying the government should commit to reducing the deficit. Britain’s VAT rate was raised to 20 percent this year from 17.5 percent in 2010.

“It’s a tricky act because he has to say he’s committed to lowering the deficit, because if you lose track of that you could end up blowing the economy out,” Cheshire said.

“The danger is you have potentially people sitting on cash on balance sheets and not feeling confident enough to invest and create jobs. Employment is the key issue.”

The U.K. ILO unemployment rate probably rose to 8 percent in September, according to the average estimate of 20 economists surveyed by Bloomberg before the announcement tomorrow.

The CEO said the overall home-improvement market in the U.K. has shrunk about 15 percent since 2005.

“I’ve been in recession for six years,” Cheshire said of the British market. “There are opportunities in a flat market with common ranges and innovation.”

The retailer, which owns French chains Castorama and Brico Depot, has compensated for a weak U.K. market with initiatives to cut the cost of buying merchandise, and has also benefited from expansion in countries such as Poland and Russia.

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